Dilutive securities are "a mechanism through which the owner of the security
can obtain additional common stock. This mechanism can be either an option
or conversion. If triggering the mechanism results in a decreased EPS for
existing shareholders by increasing the total amount of outstanding shares then
the instrument is said to be a dilutive security." (Investopedia, 2021)
Understanding both terms and knowing what they mean can help you become
a shareholder. "Some examples of dilutive securities include convertible
preferred stock, convertible debt instruments, warrants, and stock options."
(Investopedia, 2021) If someone invests in a company, they should know how
much they own. For example, if you own 10% of a company but the company
dilutes shares, your stake in the company is now lower. "It isn't just
shareholders who are concerned about dilution of EPS through the exercising
of securities. Both accountants and financial analysts compute diluted
earnings per share as a worst-case scenario when evaluating a company's
stock." (Investopedia, 2021) a As an investor I want to invest in a stable
company with reasonable debt. I can tell if I invest in a company with a good
EPS whether I'll make money or not over time. a
Team, T. I. (2021, September 13). The differences between Dilutive Securities
and anti-dilutive securities. Investopedia. Retrieved May 10, 2022, from
https://www.investopedia.com/ask/answers/102714/what-are-differences-
between-dilutive-securities-and-antidilutive-securities.asp
